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Bitcoin Halving Explained Simple - Does it Affect Bitcoin's Price? - YouTube
Channel: 99Bitcoins
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What is Halving Bitcoin...
No, not having bitcoin⊠halving Bitcoin.
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What does it mean?
When does it happen?
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What happens to the value of bitcoin
when it does happen?
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Well, stick around...
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Here on Bitcoin Whiteboard Tuesday,
weâll answer these questions and more.
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Hi everyone,
I'm Nate Martin from 99Bitcoins.com,
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and this is Bitcoin Whiteboard Tuesday!
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During each edition, weâll go over
some basic ideas about Bitcoin.
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That way you can
learn more about Bitcoin yourself
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or forward these videos to friends
or family members who have questions.
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When Bitcoin was created in 2009
by Satoshi Nakamoto,
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he designed a way for new bitcoins
to be distributed
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without a person or group of people
deciding who should get them.
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The idea, called bitcoin mining,
was to reward people with new bitcoin
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for doing the work of
verifying new transactions
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into new blocks through computational work...
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Ok, I lost some of you there.
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For a better understanding of mining,
check out our episode titled,
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âWhat is Bitcoin Mining?â
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Suffice to say that new Bitcoin is created
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as a reward for miners
verifying blocks in the blockchain.
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When bitcoin started,
the reward was set to 50 coins per block.
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But Nakamoto put into the protocol
a rule where every 210,000 blocks,
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or roughly every four years,
the reward would be cut in half,
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and so is named a âhalving eventâ.
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The first occurred in late 2012,
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where block number 210,000 rewarded
50 coins to the winning miner,
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but then block number 210,001 only rewarded
its winning miner 25 coins.
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The second halving event occurred in mid 2016,
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halving the block reward again
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so the reward for block number 420,001
came in the amount of 12.5 coins.
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And so it will go,
until sometime near the year 2140,
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when all 21 million bitcoins
will have been mined.
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So why the change?
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Why not keep the reward the same?
Isnât that unfair to the miners?
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The answer to that question
lies in the law of supply and demand.
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If the coins are created too quickly,
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and thereâs no end to the number of bitcoins
that can be created;
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eventually there will be
so many bitcoins in circulation that
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they would have very little value.
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Vitalik Buterin, who is,
at the time of this episode,
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the lead developer of the Ethereum project,
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wrote an op-ed piece for Bitcoin Magazine
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and explains the need for
slowing the distribution of bitcoins
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through halving this way:
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âThe main reason why this is done
is to keep inflation under control.
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One of the major faults of
traditional, âfiatâ, currencies
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controlled by central banks is that
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the banks can print as much of the currency
as they want,
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and if they print too much,
the laws of supply and demand
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ensure that the value of the currency
starts dropping quickly.
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Bitcoin, on the other hand,
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is intended to simulate a commodity,
like gold.
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There is only a limited amount of gold
in the world,
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and with every gram of gold that is mined,
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the gold that still remains becomes
harder and harder to extract.
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As a result of this limited supply,
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gold has maintained its value
as an international medium of exchange
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and store of value
for over six thousand years,
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and the hope is that
Bitcoin will do the same.â
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Ok... but Iâm sure youâre asking...
what will happen to the value of my bitcoin?
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Well, the short answer is... nobody knows.
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In 2016, a week after the halving event,
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not much happened to
the exchange rate of bitcoin
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against the US dollar.
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Where bitcoin was trading at around
650 US dollars at the time of the event,
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a week later the rate was about 675,
so not much of a change.
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Many believed that
the anticipated rise in price
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actually occurred between three months
and a year ahead of the event itself,
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where bitcoin was trading around $300
at a year prior
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and $430 three months
before the halving occurred.
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But that was a different time.
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Add into the mix the media attention
and subsequent public awareness spike in 2017,
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the exponential growth of ICOâs
and new coins in the marketplace,
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government regulations and restrictions,
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not to mention futures
and derivative offerings
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opening up doors for institutional investment;
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and it becomes quite the task
to predict what effect
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the next halving event will have
on global exchange rates.
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The important thing to remember is this:
Bitcoin was designed to be valuable.
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First, in that there will only ever be
a specific number of them in existence,
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21 million;
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and that inflation in bitcoinâs economy
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is kept in check by slowing its distribution
through the process of halving.
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I hope this gives you a better idea of
what bitcoin halving is,
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and why itâs an important feature of
what gives bitcoin its value.
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Now, you may still have some questions.
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If so, just leave them
in the comment section below.
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And if youâre watching this video on YouTube,
and enjoy what youâve seen,
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donât forget to hit the like button,
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and make sure to subscribe for
notifications to new episodes.
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Thanks for joining me here at the Whiteboard.
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For 99bitcoins.com, Iâm Nate Martin,
and Iâll see you⊠in a bit.
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